This excerpt taken from the ALL 8-K filed Feb 1, 2006.
Citizens Property Insurance Corporation
Citizens Property Insurance Corporation (Citizens) was created by the state of Florida to provide insurance to property owners unable to obtain coverage in the private insurance market. Citizens can levy an assessment on participating companies for a financial deficit. Citizens reported losses from Hurricane Wilma in the fourth quarter of 2005, which followed losses from the hurricanes that struck Florida in the third quarter of 2004 and a deficit for the 2004 plan year. Communications made by the Citizens board and other government officials indicate that a future assessment as a
result of Citizens current financial deficit is both probable and can be reasonably estimated. We have estimated our assessment will be $77 million.
After paying this assessment, we expect that our subsidiaries will be able to recoup approximately $65 million through premiums written in Florida. These recoupments will be recorded as an offset to catastrophe losses in the period that the related premiums are written.
Also during the second quarter of 2005, we estimated that we would be assessed $43 million by Citizens for the 2004 year. That assessment was paid in September 2005, of which $36 million is expected to begin to be recouped in the first quarter of 2006. The differences between our assessments from Citizens and our expected recoupments is primarily due to our exit from the commercial property market in Florida announced in May of 2005 and expected to be completed in 2007.
Similarly, during the third quarter of 2005, we estimated that we would be assessed $34 million from Louisiana Citizens Property Insurance Corporation (LA Citizens) related to LA Citizens estimated plan losses related to Hurricanes Katrina and Rita. This assessment was paid in November 2005 and we expect to recoup the entire amount.
These recoupments are expected to be primarily recorded over the next two years.